Pursuant to the Infrastructure Investment and Jobs Act (“IIJA”), signed into law on November 15, 2021 and effective July 1, 2022, certain excise taxes will be reinstated on certain chemical and imported chemical substances (so-called “Superfund Excise Taxes”). If the implementation of the Superfund Excise Tax is not delayed, it will apply from July 1, 2022, through December 31, 2031.
It has been almost 30 years since the Superfund Excise Taxes were last in effect. Prior to expiration in 1995, the Superfund Excise Taxes were used to fund the Hazardous Substance Superfund, established by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). The U.S. Environmental Protection Agency (EPA) used the funds raised by the Superfund Excise Taxes to clean up hazardous waste sites around the United States. At that time, the application of the Superfund Excise Taxes, use of the funds, and the corresponding reporting requirements were quite well understood, and the U.S. Internal Revenue Service (IRS) developed a relatively robust series of guidance documents to explain how the Superfund Excise Taxes operated and who was subject to the tax.
If reinstated, the Superfund Excise Taxes will apply to a list of 42 taxable chemicals listed in Section 4661 of the U.S. Internal Revenue Code. Many of the chemicals listed are commonly found in consumer products. The Superfund Excise Taxes will also apply to certain taxable substances if 20 percent of the weight or value of the materials used to produce the taxable substance is comprised of taxable chemicals. There are 121 substances on the IRS’ list of taxable substances as of June 24, 2022, and further substances may be added or removed from the list of taxable substances at a later date.
The IRS has yet to release detailed guidance in respect of the reinstatement of the Superfund Excise Taxes, but did recently release a Frequently Asked Questions (FAQ) document to help clarify some of the nuances of the applicability of the reinstated tax.
Michael Best will continue to track the implementation and consequences arising from the reinstated Superfund Excise Taxes. If you have any questions or concerns about how the reinstated Superfund Excise Taxes may impact your business, please contact your Michael Best attorney or any of the authors listed here.